GLOBAL GA - Holman Fenwick Willan

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Customary law is defined as resulting from a “general and consistent practice of parties followed by them from a sense of legal obligation”. It is also possible for terms to be implied into a contract according to the custom of the market in which the contracting parties are operating. In common law jurisdictions (Australia, Malaysia, New Zealand, Singapore etc), the rule is that the custom must be “certain, notorious, reasonable, recognized as legally binding and consistent with the express terms of the contract”. There must be proof that a custom is generally accepted by those who work or trade with the oil and gas and aviation industries. Moreover, the custom must be so generally known that an outsider who makes reasonable enquiries could not fail to be made aware of it. Case law suggests that the size of the market or the extent of the trade affected is neither here nor there. Like all terms implied by courts, parties can seek to exclude customs by express terms in a contract. However, not all attempts to do this succeed because of the technicalities of local law and public policy. Legal advice should be obtained. It is clearly in the interests of the oil and gas and aviation industries to significantly reduce the accident rate. Whilst the allocation of risk is an acceptable practice, ignore safety requirements at your peril! HFW represents companies in the energy sector, including oil and gas exploration and production companies, and owners and operators of terminals, ships and aircraft. With our in-depth knowledge of handling large scale disputes and catastrophic 06 General Aviation Bulletin losses for these industries we can offer an unparalleled approach to managing your risks. For more information, please contact Peter Coles, Partner, on +852 3983 7711 or peter.coles@hfw.com, or your usual contact at HFW. Country focus: India Despite the well publicised financial crisis affecting its major carriers, India’s aerospace industry remains one of the fastest growing in the world. The general aviation (GA) market is particularly buoyant and expected to develop into the third largest market for business aviation in the world by 2020. According to a report published by the Centre for Asia Pacific Aviation (CAPA) last year, the Indian GA industry could see new aircraft sales (business jets, helicopters, turboprops and piston engines) of up to US$12 billion over the next decade with a contribution of some US$4 billion per annum to the Indian economy by 2020. Whilst the potential for growth in the GA industry is undoubtedly huge, there are significant hurdles to overcome for this to be realised. This article explores some of these hurdles and looks ahead to possible solutions. Challenges Lack of infrastructure As the Indian economy booms and its corporations expand, demand for business jets and helicopters has significantly increased. A large number of high net-worth individuals and a fast growing tourism industry have contributed to this trend. At present India does not have sufficient infrastructure in place to adequately cater for its GA fleet and considerable investment is necessary to address this. According to a report published by PWC in March 2012 (General Aviation: Unfolding Horizons), India has only one airport for every 4.6 million people. By contrast, the US has one airport for every 60,000 persons. Approximately 150 airports in India are capable of handling business aviation aircraft. The Indian Business Aviation Operators Association (BAOA) estimates that a further 100 airports and as many as 700 heliports need to be built during the next seven years to provide for the expected increase in GA traffic movement. Facilities at the vast majority of the airports capable of handling business aviation aircraft are substandard. Common problems include limited hangar and parking space (particularly at airports located at or near to major cities), non-existent ground handling facilities, a lack of basic navigation aids and inadequate equipment for night landings. There are also no heliports of any consequence in the entire country. A related problem is the shortage of Fixed Base Operators (FBOs) and Maintenance and Repair Organisations (MROs) to service business aircraft. Facilities that do exist are more geared towards commercial aviation and India does not currently have a sufficient pool of skilled engineers with the required training to carry out maintenance on business jets and helicopters. A shortage of pilots is an additional concern. Competition for slots is intense,
particularly at the major airports, some of which (including Mumbai) actively discourage GA aircraft by imposing landing curfews during peak hours. Complex regulatory regime Regulations governing the operation of business jets in India have long been perceived as overly cumbersome and bureaucratic. There are numerous government bodies involved in the regulatory process, including the Ministry of Civil Aviation (MOCA), the Directorate General of Civil Aviation (DGCA) and the Directorate General of Foreign Trade (DGFT). Whilst each body has a designated role, the complexity and weight of the procedures they have created undoubtedly stifles growth in the GA sector. An example is the process for importing and registering an aircraft, which is complicated and time consuming. Permission of the Central Government is required before any person can operate an air transport service (scheduled or non-scheduled) to, within or from India. The DGCA is responsible for issuing Air Operator’s Permits, which will only be granted to an Indian citizen or company. The operator must first obtain an initial No Objection Certificate (“NOC”) from the Ministry of Civil Aviation in Delhi before it can obtain an Air Operator’s Permit. This requires the disclosure of a considerable volume of information, including details of the proposed operations and the financial structure of the applicant. If foreign investment is envisaged, the Foreign Investment Promotion Board must give its approval and the Directors and Chairman of the applicant must obtain security clearance. Foreign financial institutions and other entities who seek to hold equity should not be associated with foreign airlines, have foreign airlines as their shareholders, or have any office of a foreign airline involved in their management. If the Ministry of Civil Aviation grants an initial NOC, it will normally be valid for a period of 18 months. The next step is for the applicant to apply to the DGCA for an NOC for import and submit detailed information relating to the aircraft, including the type certification and proof that stipulated equipment and accessories are fitted. The DGCA will grant permission for import based on the recommendations of the Ministry and its standing committee. The NOC for import given by the DGCA will be valid for one year or until the date of expiry of the initial NOC given by the Ministry. An import license from the DGFT is then required. Aircraft can only be imported for personal use by companies and individuals and cannot be utilised for hire and reward unless specifically permitted by the Ministry. Once imported, an aircraft must be registered in India before it can be flown and there are regulatory hurdles here also. Tax implications must also be considered. These can be significant, particularly for private operators who are required to pay customs duty of 25% of the value of the imported aircraft. For business aircraft not registered in India, each flight within the country must be specifically sanctioned and it can take up to seven days to get a permit to land. An added consideration is that customs duty will become payable if the aircraft remains in the country for a period of sixty days or more. It will be apparent from the above that the regulations governing the operation of business aircraft in India are far from straightforward and likely to inhibit the growth of the GA sector unless action is taken to cut away unnecessary red tape. Opportunities Industry bodies, most notably the recently formed BAOA, are lobbying the government hard for the challenges identified above (among others) to be addressed. Progress is certainly being made and an integrated plan for business and general aviation in India (covering helicopters, sea planes and fixed-wing operations) is being worked on by a team that includes representatives from ICAO and the Indian Ministry of Civil Aviation. It is hoped that the plan will be worked into the new draft Civil Aviation Policy, expected to be released later this year. Meanwhile the Government has plans in place to build a number of greenfield airports and upgrade various existing ones across the country to ease the burden on those that are capable of handling business aviation aircraft. Mumbai’s Chhatrapati Shivaji International Airport recently became the first airport in India to commence international operations from a dedicated GA terminal. Others are expected to follow. The growth of the Indian aerospace industry and the relative lack of MRO support presents opportunities that some companies are already capitalising on. The best example is General Aviation Bulletin 07
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